Negotiable Instruments

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  • Introduction
  • General Principles
    • Concept of Negotiable Instruments
      • Definition
        • Negotiable Instrument vs Legal Tender
          • Negotiable Instrument – A written instrument signed by the maker or drawer containing an unconditional promise or order to pay a sum certain in money which is payable on demand, or at a fixed or determinable future time. It must be payable to order or the bearer and where it is addressed to the drawee, he must be named or otherwise indicated therein with reasonable certainty.
          • Legal Tender Power– All notes and coins issued by the Bangko Sentral ng Pilipinas shall be fully guaranteed by the Government of the Republic of the Philippines for all debts, both public and private: Provided, however, that unless otherwise fixed by the Monetary Board…(Section 52 of RA 7653, the New Central Bank Act)
        • Functions
        • It is a substitute for Money
        • It is a medium of Exchange
        • It is a credit instrument which increases credit circulation
        • It increases purchasing power in circulation
          • It is proof of transactrion
          • Characteristics of Negotiable Instruments
            • Negotiability – of an instrument is determined by ascertaining if all the requirements of Sec. 1 appears on the face of the Instrument.
              • Factors in Determining Negotiability
              • Acceptance Not a Requisite
              • Indorsement
            • Accumulation of Secondary Contracts
          • Incident in the life of a Negotiable Instrument
            • Preparation
            • Issuance
            • Negotiation
            • Presentment for Acceptance
            • Acceptance
            • Dishonor by Non- Acceptance
            • Presentment for Payment
            • Dishonor by Non-Payment
            • Protest
            • Discharge
          • Kinds of Negotiable Instruments
            • Negotiable Promissory Notes (Sec 184, NIL)
              • Definition
                • Promissory Notes – A negotiable promissory not within the the meaning of this act is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer. Where a note is drawn to the maker’s own order, it is not complete until indorsed by him.
              • Kinds of Negotiable Promissory Notes
                • Bank Certificate
                • Bonds and Debentures
                  • Kinds of Bonds
                    • Bottomry Bonds
                    • Chattel mortgage Bonds
                    • Collateral Trust Bonds
                    • Convertible Bonds
                    • Coupon Bonds
                    • Guaranteed Bond
                    • Income Bond
                    • Joint and Several Bond
                    • Joint Bond
                    • Mortgage Bond
                  • Bank Notes
                • Parties to a Negotiable Promissory Notes
                  • Maker – is the person who promises to pay according to the tenor of the note.
                  • Payee – is the person who is to receive payment from the Maker.
                • Bills of Exchange (Sec 126, 185 NIL)
                  • Definition
                    • A Bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer.
                  • Kinds of Bills of Exchange
                    • Drafts and Acceptances
                    • Inland and Foreign Bill
                    • Checks
                    • Clean and Documentary Bill of Exchange
                  • Parties to the Bill of Exchanges
                    • Drawer – is the person who draws the bill and orders the Drawee to pay the Payee.
                    • Drawee – is the one being commanded to pay the instrument. however, in reality, the drawee is not a party unless he accepts the bill. If he accepts, the drawee, now called Acceptor, assents to the order made by the drawer.
                    • Payee – is the person who is to receive payment from the Drawer through the Drawee/Acceptor.
                  • Negotiable Instruments vs Other Papers
  • Forms and Interpretation of Negotiable Instruments
    • General Principle
      • How Negotiability is Determined
      • Negotiation (Sec 10. NIL)
      • Assignment vs Negotiation; Liability of the Assignor (Art. 23. Commerce Code)
        • Casabuena vs CA (286 SCRA 594)
      • Effect of Estoppel
        • Banco De Oro vs Equitable Banking Corp. (157 SCRA 188, 1988)
        • PBCom vs Aruego (102 SCRA 530, 31 January 1981)
      • Requisite of Negotiability (Sec. 1 NIL)
        • It must be in writing and signed by the maker or drawer (Sec. 191, NIL)
        • It must contain unconditional promise or order to pay a sum in money
          • Promise or Order to Pay (Sec 10, NIL)
          • Promise or Order to Pay must be unconditional
          • Resolutory vs Suspensive Condition (Art. 1173, 1181, NCC)
          • When is a promise unconditional (Sec. 3, 39, NIL)
          • Sum certain in money (Sec. 2-5d, 6e, NIL; CB Circular 799, 1 July 2013; Art. 2209 NCC)
          • Acceleration Clause
          • Insecurity Clause
          • Extension Clause
            • Metropolitan Bank vs CA (194 SCRA 169, 18 February 1991)
          • It must be payable on demand or at a fixed determinable future time
            • Pay vs Palanca (57 SCRA 618)
          • It must be payable to order or bearer
            • Ang Tek Lian vs CA (87 Phil 383, 25 Sept 1950)
          • The drawee must be named or indicated with reasonable certainty (Sec 1e, 130 NIL)
        • Omissions or Provisions that do not affect negotiability
        • Interpretation of Instruments
        • Issuance / Delivery of Negotiable Instruments
          • Dela Victoria vs Burgos (245 SCRA 374, 27 June 1995)
        • How Negotiable Instruments and Non Negotiable Instruments Transferred
          • Sesbreno vs CA (222 SCRA, 24 May 1993)
          • Consolidated Plywood vs IFC Leasing (149 SCRA 448, 30 April 1987)
          • Traders Royal Bank vs CA (269 SCRA 16, 3 May 1997)
        • How Negotiation takes place (Sec 16, 30, 40 NIL)
          • Manuel Lim vs CA (251 SCRA 409, 19 December 1995)
          • Dela Victoria vs Burgos (245 SCRA 374, 27 June 1995)
          • Development Bank or Rizal vs Sima Wei (217 SCRA 743, 9 March 1993)
        • Incomplete Negotiation of Order Instrument (Sec. 49, NIL)
    • Negotiation
      • Where indorsement should be placed (Sec. 31, NIL)
      • When person deemed an indorser (Sec. 63, NIL)
      • Other rules of indorsement (Sec. 31, 32, 40-48, 49, NIL)
        • Enrique Montinola vs PNB (68 Phil 178, 26 Feb 1951)
        • Ang Tek Lian vs CA (87 Phil 383, 25 Sept 1950)
      • Kinds of Indorsement (Sec. 33, NIL)
        • Blank and Special (Sec. 34, 35 NIL)
          • Conversion of blank indorsement to special indorsement (Sec. 35, NIL)
        • Qualified and General (Sec. 38, 65, NIL)
          • Metropol (Bacolod) Financing vs Sambok Motors (120 SCRA 864, 28 February 1983)
        • Conditional (Sec. 39, NIL)
        • Restrictive (Sec. 36, 37, 47, NIL)
          • Gempesaw vs CA (218 SCRA 628, 9 February 1993)
        • Absolute
        • Joint (Sec. 41, NIL)
        • Irregular (Sec. 64, NIL)
      • When endorsement is necessary (Sec. 30, 184, NIL)
      • Indorsement of entire Instrument (Sec. 32, NIL)
      • Indorsement of bearer Instrument (Sec. 40, NIL)
      • Indorsement when payable to two or more persons (Sec. 41, NIL)
      • Indorsement in Representative Capacity (Sec. 44, NIL)
      • Presumption of time and place of indorsement (Se. 45, 46, NIL)
      • Continuation of Negotiable Character (Sec. 47, NIL)
      • Negotiation by Prior Party (Sec. 50, NIL)
      • Striking out of Indorsement (Sec. 48, NIL)
      • Effects of transfer without Indorsement (Sec. 49, NIL)
    • Consideration
      • Consideration of Issuance and subsequent transfer (Sec. 24, NIL)
      • What constitute Value (Sec. 25, NIL)
        • Bibiano Banas vs CA (325 SCRA 259, 10 February 2000)
      • Effect in the Value previously given (Sec. 26, NIL)
      • Holder of value (Sec. 26, 27, NIL)
      • Effect of want of Consideration (Sec. 28 NIL)

 

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